Undervalued yuan costs Germany billions in growth

Rigged Currency With a Fair Yuan, Germany Could Save Billions

2026-06-22 Source: dpa | Translated by AI 1 min Reading Time

The artificially low Chinese currency yuan, kept that way by Beijing, costs the German economy billions in growth every year ...

The Chinese yuan is actually worth more than the valuation allowed by the Beijing government! This artificial devaluation costs Germany billions. According to experts, a fair exchange rate is therefore necessary. And China could also benefit more from it than suffer ...(Image: Cinbi-yuan) — The Chinese yuan is actually worth more than the valuation allowed by the Beijing government! This artificial devaluation costs Germany billions. According to experts, a fair exchange rate is therefore necessary. And China could also benefit more from it than suffer ...
(Image: Cinbi-yuan)

The inflation-adjusted gross domestic product (GDP) in Germany could be up to 0.3 percent higher in 2028 with a fair valuation of the Yuan, according to experts. This was the result of a study funded by the Federal Foreign Office conducted by the German Economic Institute (IW). Over the years 2026 to 2028, the amount sums up to around 43 billion euros, according to IW. For the simulation, the Yuan was thus revalued by 40 percent. According to experts’ assessment, this roughly corresponds to a fair valuation of the Chinese currency. However, Beijing does not allow a free exchange rate but rather operates a state-controlled currency management. At least, that is the institute's judgment. And this deliberate undervaluation automatically makes Chinese exports cheaper, which in turn makes imports more expensive. It is effectively like playing with a stacked currency.

China's Currency Management is Poison for Free Trade

This is also why German exports to China have significantly decreased in value, while imports of Chinese goods have massively increased. The trade balance deficit with China therefore grew to around 90 billion euros (approx. $96.5 billion) in 2025. A fair valuation of the Yuan, according to the IW, could even help China better balance its export-driven economy. Although China's GDP would initially collapse in the short term, the simulation suggests a quick counter-movement through an increase in domestic demand. Since exports become less attractive, more goods remain in the domestic market, causing prices to fall. The increase in domestic demand could largely offset the reduced export surplus within a few years, emphasizes the IW. By 2028, China's economy would thus almost regain the level of the baseline scenario with an undervalued currency.

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